"The Chinese stock market's steep losses since the Olympics [began] are also denting sentiment towards heavy industry such as steel makers and shipbuilders," said Won Jong-hyuck, a market analyst at SK Securities in Seoul.

"There are worries the Chinese economy may not grow as robustly after the Olympics."

In South Korea and Singapore, indices lost about 1.7 per cent each.

Japanese government bonds climbed as equity markets declined, boosted by gains in US Treasuries.

Japanese bonds continued to draw support from investors worries about domestic and global economies, underscoring the prevailing view that the Bank of Japan will keep interest rates steady.

Against the yen, the dollar was down 0.3 per cent at 109.82 yen slipping from last week's 7-month high above 110.50.